As he has done before, whenever President Obama is in political trouble, he seeks to rally his base with a particular brand of populism designed to appeal to those who have an impaired memory of his previous diatribes.

But as he rails against income inequality, seeks a raise in the minimum wage and tries to lower the cost of college, we should all remember the policies of this administration that are causing income inequality.

Since Obama took office, 85 percent of all income growth has been concentrated in the top 1 percent of the population. (Under George W. Bush it was 65 percent, and under Bill Clinton it was 45 percent).

The bottom 99 percent have stagnated during the Obama years, but the rich have gotten immensely richer.

This trend is a direct result of his quantitative easing program, in which the Federal Reserve purchases $85 billion of bonds each month, giving banks a windfall of cash to use as they wish.

In theory, they are supposed to lend the money out. However, the banks have asked the Fed to pay them 3 percent interest on funds they keep on deposit. So, without doing anything, banks get free money from the Fed vaults. (Why would a bank lend money to a risky borrower at 6 percent when it can get 3 percent from the Feds?)

This monthly infusion permits bankers to buy back stocks to add them to their stock option compensation, distribute Christmas bonuses or engage in risky trading in derivatives or other speculative investments. Despite having paid nothing to get the money, they have broad latitude in investing it.

Obama's zero interest policy has blocked savings and limited investment, which is the only way to spur productivity. If productivity doesn't grow, incomes don't either, except through inflation.

This policy also makes a mockery of the elderly who have been thrifty and saved during their entire working lives in the hopes that their nest egg would provide them modest funds on which to retire. Not with zero percent interest, it won't, unless they invest in risky stocks, where it could all be wiped out.

Obama's refusal to crack down on Chinese currency manipulation also stagnates incomes in this country. Despite China's undervalued currency leading to the largest trade surplus in five years, the Obama administration is refusing to designate China as a currency manipulator, or to bring actions against the policy before the World Trade Organization (WTO). It is worth noting that China had no appreciable surplus with the U.S. until it was admitted to the WTO in the first place.

Finally, ObamaCare has blighted full-time employment in the U.S. Since January, 152,000 fewer people are working full time, and 400,000 are part-time workers, as employers juggle their payrolls to keep the number of full-time workers under the threshold of 50 that would trigger mandatory compliance under the Affordable Care Act. Anxious to avoid the requirement that they provide health insurance or face a fine of $2,000 per worker, employers are obliterating the 40-hour week, according to no less a source than the AFL-CIO.

Obama's populist rhetoric ignores a key fact: While the top fifth and the bottom fifth of the country at any moment have a vast and widening disparity in income, there is great individual upward -- and downward -- mobility. A 20-year study by Pew showed that 60 percent of the bottom fifth moved up over two decades, with 4 percent making it into the top fifth. It also showed that 60 percent of the top fifth fell out over the period.

The important downward mobility shows in Obama's polling, which triggers his divisive rhetoric in the first place.

Yes, isn't it odd that Obama's policies actually cause income inequality to get worse - as we stagnant. It only proves that, as he tries to teach uswhat he knows, he really knows nothing about the subject. -------------------------

Tax rate progressivity for the last 34 years - below. (That the executive ever paid less in taxes than his secretary in any real sense is bullsh*t.)

I don’t put much past politicians. I stay prepared for the worst. But occasionally someone says something so insensitive that it catches me flat-footed.

Senator Rand Paul, Republican of Kentucky, said Sunday on Fox News: “I do support unemployment benefits for the 26 weeks that they’re paid for. If you extend it beyond that, you do a disservice to these workers.”

This statement strikes at the heart — were a heart to exist — of the divide between conservatives and liberals about whether the social safety net provides temporary help for those who hit hard times or functions as a kind of glue to keep them stuck there.

Whereas I am sure that some people will abuse any form of help, I’m by no means convinced that this is the exclusive domain of the poor and put-upon. Businesses and the wealthy regularly take advantage of subsidies and tax loopholes without blinking an eye. But somehow, when some poor people, or those who unexpectedly fall on hard times, take advantage of benefits for which they are eligible it’s an indictment of the morality and character of the poor as a whole.

The poor are easy to pick on. They are the great boogeymen and women, dragging us down, costing us money, gobbling up resources. That seems to be the conservative sentiment.

We have gone from a war on poverty in this country to a war on the poor, in which poor people are routinely demonized and scapegoated and attacked, and conservatives have led the charge.

They paint the poor as takers, work averse, in need of motivation and incentive.

Well, that is simply not my experience with poverty. I have been poor, and both my parents worked. I grew up among poor people, and almost all of them worked. The problem wasn’t lack of effort, but low pay. Folks simply couldn’t make enough to shake the specter of need.

In fact, the poor folks I knew growing up were some of the hardest working people I have ever known — rising before dawn to pack lunches and sip coffee, trying to get the mind right for a day of toil and sweat that breaks the body but not the spirit.

They were people who wanted what most folks want — to earn an honest wage for an honest day’s work; to live a happy, meaningful life that leaves a mark on the world when they are gone from it; to raise bright, healthy children who go further in life than they did; to be surrounded by family and friends and neighbors — a village — where people support and cared for one another.

That is why I have such a hard time with the conservative argument that helping those in need diminishes their desire to do for themselves, that it suckles them to passivity on a government teat. Hogwash.

To buy into this destructive lie about the character of the poor means you’ve either had no experience being poor, or have no capacity to empathize with their plight.

Being poor is a job unto itself. The daily juggle of supplying the most basic needs — food, shelter, medicine — and the stress of knowing that you are always just one twist of fate away from calamity.

James Baldwin put it best: “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.”

Most people want to work. But sometimes, bad luck comes calling. Sometimes you have a job, but you lose it. Sometimes, no matter how hard you try, a new one proves elusive.

And following the Great Recession, that is a particular problem. Maybe you are older and employers are less willing to take a chance. Maybe your industry is shrinking and becoming more efficient, getting by with fewer employees. Maybe the jobs you can find are farther from your house than you can travel and you can’t afford to move. The problems are plenty.

But what we shouldn’t do is to tell people who had jobs and lost them, people who want work and can’t find it, that to help them does them a “disservice.”

That is the height of arrogance and callousness. And it’s disrespectful.

In messaging, the more compassionate voice wins, hence Obama elected twice, a Dem Senate, etc. in practice, the Charles Blow view loses; it makes things worse for the people they purport to help. Easily proven in the data, see yesterday's posts.

So Rand Paul is right on policy and wrong on messaging. Unemployment compensation prolongs unemployment. It is a provable fact. Food stamps create dependence. Minimum wage hurts low end employment. SSI requires a contract with poverty for people on the edge of the workforce. Pointing out any of these truths inspires columns by well-publicized, liberal Blow-hards.

No one here, especially not me, has messaging figured out. But the answer has something to do with focusing our time and message on positively painting the picture of a prosperous, opportunity society, how we can do that, and not arguing against the details of social spending programs with leftists. When you suggest cutting food stamps, unemployment, disability you are losing votes. Instead, move prosperity forward and move these programs down in importance.

Remember the movie "Do the right thing" where three black guys are sitting playing cards watching the Korean across the street wondering why they don't have a business like him.

My Indian colleague who came to the US with nothing pointing out how Indians have achieved in a single generation what Blacks have not been able to do.

My Filipino colleague who arrived to the US with exactly 50 cents in his pocket which was just enough to call for a ride to the army office to volunteer to serve. He is now a successful specialist in medicine.

And don't waste my time getting us white people keeping everyone else down schpiel (sp?). The Indians were not loved. I have heard many stories of discrimination from them.

Yet they persevered. Kept their heads down and their focus on their dreams.

Ever see the movie "slum dog millionaire". NOW THOSE people are disadvantaged. They don't live in the United States.

I am tired of Blow and those like him who think they think.

As far as I am concerned he is callous and disrespectful of those in this country who are carrying the weight for the rest.

In his widely noted speech, President Obama said that "a dangerous and growing inequality and lack of upward mobility" is "the defining challenge of our time." This belief makes Mr. Obama unique: Unlike the other presidents since World War II, he places inequality above economic growth as the organizing principle of U.S. economic policy. The president's Dec. 4 speech, at an event hosted by the Center for American Progress, also stressed that increasing inequality is a "decades-long trend"—which carries with it the strong implication that the country needs to reverse the direction it has taken for the last three decades. But like so many of his other pronouncements, the assumptions behind his defining challenge are misleading.Enlarge Image

President Obama at an event hosted by the Center for American Progress, Dec. 4. Reuters

Virtually all of the data cited by the left to decry the supposed explosion of income inequality, as Lee Ohanian and Kip Hagopian point out in their seminal paper, "The Mismeasure of Inequality" (Policy Review, 2011), use a Census Bureau definition of "money income" that excludes taxes, transfer payments like Medicaid, Medicare, nutrition assistance, the Earned Income Tax Credit, and even costly employee benefits such as health insurance.

Thus the data that is conventionally used to calculate the so-called Gini coefficient—the most commonly used measure of income inequality—ignore America's highly progressive income tax system and the panoply of benefits and transfer payments. According to Messrs. Ohanian and Hagopian, once the effect of taxes and transfer payments is taken into account, "inequality actually declined 1.8% during the 16-year period between 1993 and 2009, when the Gini coefficient dropped from .395 to .388."

In his speech, Mr. Obama cited a recent study from economists at Columbia University that found that already enacted benefits and tax programs have reduced America's effective poverty rate by 40% since 1967—to 16% from 26%. But he ignores all this when he claims that inequality is increasing.

The Columbia study shows that Messrs. Ohanian and Hagopian's research is hardly an outlier. The Congressional Budget Office released a study that came to a similar conclusion in October 2011. The CBO study picked an artificial starting point of 1979, amid a crushing period of stagflation. Yet it still showed that family income, including benefits, on average experienced a 62% gain above inflation from 1979 to 2007. It also showed that all five quintiles of the income distribution spectrum experienced real gains in family income.

The CBO study contradicts Mr. Obama's claims in the 2008 presidential campaign and early in his first term that the middle class was "falling behind." The real concern is that some people were getting too far ahead.

With respect to upward mobility, longitudinal studies conducted by the U.S. Treasury have found that there was "considerable income mobility" in the decades 1987-1996 and 1996-2005. For example, roughly half of those in the bottom income quintile in 1996 had moved to a higher quintile by 2005. The "median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups" in that decade, while the real incomes of two-thirds of all taxpayers experienced an increase.

Here is the bottom line: In periods of high economic growth, such as the 1980s and 1990s, the vast majority of Americans gain, and have the opportunity to gain. In periods of slow growth, such as the past four and a half years since the recession officially ended, poor people and the middle class are hurt the most, and opportunity is curbed.

Consider the Census Bureau data, which measure only money income. The data show that median family income adjusted for inflation has not been on a steady or stagnating path since the 1970s. It fell, in real terms, by 5.7% from 1974-1982, when slow growth and high inflation ravaged the average family. Tellingly, in this period, real income fell for the bottom four quintiles, but held steady for the top 20%.

From 1983 to 2007, however, median family income grew substantially—by 21.6% above inflation—and real income grew for all five quintiles. Then, beginning in 2008, real income plunged again, both for the median family and for all quintiles.

The point is this: If the goal is to deliver higher incomes and a better standard of living for the majority of Americans, then generating economic growth—not income inequality or the redistribution of wealth—is the defining challenge of our time.

Regarding growth, Mr. Obama claimed in his speech that we should use some money "to create good jobs rebuilding our roads and our bridges and our airports, and all the infrastructure our businesses need." Yet a recent analysis by BCA Research shows a sharp drop in real spending by the government on nondefense infrastructure since the president took office. When a Democratic Congress passed the president's massive $800 billion stimulus bill, seven-eighths of the total went to transfer payments like Medicaid, food stamps and sending a check to millions of Americans who do not pay income taxes.

The president claims to be concerned about spurring private investment. But investors at home and abroad can readily see that his steadfast refusal to reform the country's entitlement programs threatens spending on physical infrastructure, education, university research and other items that will contribute to the future productivity of the United States. That same unrestrained entitlement growth, and the debt that comes with it, will ultimately compromise the value of dollar-denominated assets. Public companies have trillions of dollars of cash to invest sitting on their balance sheets, but the Obama economy's growth record is weak, and insufficient to attract capital investment.

Straining credulity, Mr. Obama also pointed in his income inequality speech to the Affordable Care Act as one of his initiatives to improve the economy, despite clear evidence that the law's employer mandate is discouraging full-time employment. For most of this year, the overwhelming majority of jobs added to the U.S. economy have been part-time, not full-time. Gallup's payroll-to-population ratio, the proportion of the American population working full time, has dropped almost two full percentage points in the last year, to 43.8%.

Mr. Obama said in his speech that "making sure our economy works for every working American" is what "drives everything I do in this office." Accomplishing this worthy goal requires growth, not redistribution.

Mr. Grady, a managing director at the private-equity firm Cheyenne Capital Fund, is the chief economic adviser to New Jersey Gov. Chris Christie and chairman of the New Jersey State Investment Council.

Prospective trials of and not only retrospective collection of after the fact "big Data" will prove the Columbia know it all's wrong.

**** The common conclusion from such trials is that the poor’s own decisions matter much more than was once thought. Even the poorest of the poor have tiny amounts of discretionary cash and their decisions about what to spend it on (bednets, for example) make a huge difference to development. This view of the poor is at odds with the one espoused by “Big Push” economists, such as Jeffrey Sachs of Columbia University, who argue that people are stuck in poverty, can do little for themselves and that development should therefore consist of providing the poor with benefits—like irrigation, roads and hospitals—that spring the poverty trap. But it is also at odds with critics of Big Push thinking. J-PAL’s trials show not only that the poor’s decisions are important but that they are sometimes bad****

Another article from the Economist:

Random harvest

Once treated with scorn, randomised control trials are coming of age Dec 14th 2013 | From the print edition

IT ALL began with a white envelope. Inside, a letter from the provost of the Massachusetts Institute of Technology offered three young economists at MIT $100,000 to spend as they wanted (those were the days). Two of them, Esther Duflo and Abhijit Banerjee, used the money to set up an organisation to run “randomised control trials” (RCTs), an experimental technique a bit like drugs trials, but for economics. To test if, say, boosting teachers’ pay improved educational outcomes, an RCT would take a collection of comparable schools, randomly assign higher wages to some teachers but not others, and see what happens. The organisation, called J-PAL (to give it its full title, the Abdul Latif Jameel Poverty Action Lab), has just celebrated its tenth anniversary. Its methods have transformed development economics.

When J-PAL started in 2003, RCTs were regarded as wacky. Critics said that doing a trial was like putting people in a cage and experimenting on them. They pointed out that you cannot conduct randomised trials for big macroeconomic questions (“What happens if we devalue the currency by 50%?”) because there can be no control group. They conceded RCTs might generate useful nuggets of evidence (raising teachers’ wages in India, for example, did surprisingly little to improve learning). But they argued that evidence from such trials would always remain small-scale, tied to a specific context and not be useful beyond it.

Massachusetts Institute of TechnologyOrganisation for Economic Cooperation and Development

Ten years on, few of those criticisms have stood up to scrutiny. RCTs have entered the mainstream. J-PAL has conducted 440 of them (it started with five). The World Bank runs RCTs. So do regional bodies like the Inter-American Development Bank. Even governments deploy them: Indonesia used one to test whether identity cards would improve the delivery of subsidised rice to the poor, the largest anti-poverty programme in the country (they did). Techniques for designing and doing trials have improved, with more accurate measurements and more reliable ways of ensuring that samples are random and not merely arbitrary. Trials are bigger. A recent one took place throughout the Indian state of Andhra Pradesh, which has a larger population than Germany. Trials are now investigating questions previously thought off-limits to RCTs, such as labour-market policies or policing. J-PAL did a trial in half the cities in France to determine whether job-training encouraged employment growth overall or just boosted the prospects of trainees at the expense of the untrained. (Answer: before 2007, it helped everyone; afterwards, it redistributed jobs rather than creating them.)

As the number and scope of trials have grown, the accumulation of detail has started to generate broader insights. Take education. J-PAL ran trials on many questions, from the effect of remedial classes in India and Ghana (enormous) to what happens if you double the number of teachers in Kenya (not much). One conclusion kept cropping up: the biggest improvements to educational outcomes occur when you teach children things they are capable of learning. That sounds like a statement of the obvious. But it is quite different from the view of (say) the OECD, a club mainly of rich countries, which runs influential studies on mathematics and literacy among its members. The OECD thinks the quality of teachers matters most. J-PAL’s finding also goes against the grain of what many parents believe: that the focus should be on the quality of the curriculum.

In other areas, RCTs have revealed as much about what is not known as what is known. Microfinance, for example, does not turn the poor into entrepreneurs, as was hoped, but does make them better off: many use the tiny loans to buy television sets. It is not clear why. Poor people also buy too little preventive health care for themselves, even though the benefits are huge. RCTs show that if you charge a pittance for simple products such as bednets treated to combat malaria or water purification tablets, people do not buy them; the products have to be free.

Development economics on trial

The common conclusion from such trials is that the poor’s own decisions matter much more than was once thought. Even the poorest of the poor have tiny amounts of discretionary cash and their decisions about what to spend it on (bednets, for example) make a huge difference to development. This view of the poor is at odds with the one espoused by “Big Push” economists, such as Jeffrey Sachs of Columbia University, who argue that people are stuck in poverty, can do little for themselves and that development should therefore consist of providing the poor with benefits—like irrigation, roads and hospitals—that spring the poverty trap. But it is also at odds with critics of Big Push thinking. J-PAL’s trials show not only that the poor’s decisions are important but that they are sometimes bad (for example, their underinvestment in health). Critics of the Big Push, such as William Easterly of New York University, say the best way to help the poor is to stand back and stop messing up their lives. In contrast, J-PAL’s trials imply that there is a role for outsiders to improve the decision-making of the poor by, say, improving information or incentives.

Over the past ten years, randomised trials have changed hugely. They began as ways to provide hard evidence about what was actually happening. Now they have become techniques for testing ideas that cannot be investigated in any other way. (Are teachers or trained volunteers better at providing simple remedial lessons? Do a trial.) Over the next ten years they will change again. They are likely to get more ambitious still, use “big data”, engage even more with governments and probably measure things that cannot now be tested (RCTs are already measuring cortisol levels as a way of judging how policies affect people’s happiness). Who knows, their proponents might even find a way to apply them to the sweeping assertions of macroeconomists.

There were three wise men, bearing gifts: gold, frankincense, and myrrh. Much has been written about the mystical connotations of those gifts, but it is rarely, if ever, asked: Where did they get them?

Presumably, Balthazar, Melchior, and Caspar were not engaged in gold mining, frankincense farming, or myrrh cultivation. They had other things to do, other stars to follow. For Christians, and for men of goodwill categorically, this is an important question: Feed my sheep, saith the Lord — okay: Feed ’em what? Some of the Apostles were said to have the gift of healing through the laying on of hands; those without such gifts still have an obligation to heal the sick (if the ACLU will allow it), which means building hospitals and clinics, equipping doctors and nurses, etc. With what?

If ye had but faith in the measure of a mustard seed . . . and if the mustard-seed approach does not work, and the mountains we command to be uprooted remain stubbornly in place, then we are back to the old-fashioned problems of human existence: scarcity and production. That is what is so maddening about Pope Francis’s recent apostolic exhortation — which is, as much as my fellow Catholics try to explain it away, a problematic document in many ways. The pope’s argument, fundamentally, is that we can have capitalism on the condition that we feed the poor. This is exactly backward: We can feed the poor if we have capitalism. To give away wealth presumes the existence of that wealth, whether it is an annual tithe or Jesus’ more radical stance of giving away all that one owns. Giving away all that you own does not do the poor an iota of good if you don’t have anything. You can’t spread the wealth without wealth.

Conservatives sometimes protest that the Left presents government as though it were Santa Claus, but Santa Claus, bless him, is a producer. He has a factory up there at the North Pole, full of highly skilled (and possibly undercompensated) labor. He has logistics problems — serious ones. He has production deadlines. The entire point of the Santa Claus myth — at least the animated Christmas-special God Bless America version of that myth — is that those toys aren’t going to make themselves, and they aren’t going to deliver themselves. Government cannot do the work of a captain of industry such as Santa Claus, because government creates nothing. More to the point, government cannot satisfy Jesus’ command that we feed the poor — it produces no food. It has no wealth of its own.

Government isn’t Santa. It’s the Grinch.

Think about it: The redistributionist impulse is driven by envy and bitterness. It is an economic position held, not accidentally, most strongly by people who cringe at the sight of a manger scene — by people who resent and suspect the very word “Christmas.” The redistributors are the people culturally inclined to abolishing Christmas from the public sphere, who will spend the solstice wailing in angst if a public-school choir should so much as hum “Away in a Manger,” never mind singing the verboten words “Little Lord Jesus.” And, in the Grinchiest fashion, they want to take your stuff.

Does anybody really need that many Christmas presents? Is it not the case that, at a certain point, you have enough in your stocking? And who among them has the honesty of Hillary Clinton, who once proclaims that it’s necessary to take things away from us in order to achieve her vision of a better world. If you strap reindeer antlers to your dog while sharing those sentiments, you’re a Seussian villain. Strap donkey ears to yourself while endorsing the same view and you’re the president of these United States.

There is little, if any, virtue in giving gifts to the people we love. Giving gifts to those we love is like giving gifts to ourselves. There is still less virtue in taking what’s under somebody else’s Christmas tree and distributing it to your friends and allies while congratulating yourself on your compassion. To do so is unseemly. Pope Francis is quite right to argue that economic growth alone does not ensure the humane treatment of the poor and the vulnerable — where he is mistaken is that he assumes that there is another side in that argument. Nowhere in the classical liberal tradition, and certainly not in the Anglo-American liberal tradition, has the idea taken root that capitalism is a substitute for generosity. Capitalism is the precondition of generosity. If you want to feed the Lord’s sheep, you must begin by planting the fields.

is there someone here who can take on for us reporting every month the unemployment rate INCLUDING those who have given up and left the economy altogether? Currently it is somewhere in the upper 10s if I am not mistaken.

I was hoping Brain Wesbury or Scott Grannis would do it, but they are too busy being bullish...

In October, there were almost 5.7 million "missing workers" -- people who had dropped out of the labor force but, under trends prevailing before the Great Recession, would have had jobs or been looking for work. Counting them would have raised October's unemployment rate to about 10 percent, instead of the reported 7 percent (the Economic Policy Institute).

In today’s labor market, the unemployment rate drastically understates the weakness of job opportunities. This is due to the existence of a large pool of “missing workers”—potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. In other words, these are people who would be either working or looking for work if job opportunities were significantly stronger. Because jobless workers are only counted as unemployed if they are actively seeking work, these “missing workers” are not reflected in the unemployment rate.

As part of its ongoing effort to create the metrics needed to assess how well the economy is working for America’s broad middle class, EPI is introducing its “missing worker” estimates, which will be updated on this page on the first Friday of every month immediately after the Bureau of Labor Statistics releases its jobs numbers. The “missing worker” estimates provide policymakers with a key gauge of the health of the labor market.

Current “missing worker” estimates at a glanceUpdated December 06, 2013, based on most current data available

Let me do something New York Times NYT -0.13% columnist Paul Krugman isn't exactly famous for doing, at least not graciously: acknowledge a mistake.

In my Dec. 31 column on income inequality, I used a data set from the U.S. Census Bureau to make the case that incomes in the U.S. have been growing across the board, even if the incomes of the wealthy have grown faster than those of others further down the income scale. But I wrote those lines looking at a set of numbers that had not been adjusted for inflation.

Professor Krugman, in a post on his New York Times blog, takes me to task for this. Had I done so looking at the inflation-adjusted table, it would have shown the incomes of the bottom 20% essentially stagnating since 1979 (and long before then, too), though it also would have shown incomes for the top 20% rising far less dramatically.

That was an error, roughly of the kind the Nobel Laureate economist made last August when he confused an x for a 1/x. As is his charming wont, Mr. Krugman accuses me not of making an honest mistake, but of "pulling a fast one."

My mistake is all the more unfortunate because the basic point I was making is right: Americans are getting richer across the entire income spectrum, even if they are getting richer at very different rates. That much is confirmed by data from the Congressional Budget Office. The CBO finds that between 1979 and 2007 income for poor households grew by 18%, for the middle classes by nearly 40%, and for the top 81-99% by 65%. It's the top 1% who have made out very handsomely, with a jump of 275% over nearly three decades.

The difference between the Census Bureau and CBO data comes down to the complicated (and ultimately subjective) way in which "income" is defined. The Census Bureau data relies on a definition of income that is pre-tax but post-transfer cash income. But it also excludes the non-cash benefits that go to many of the poor, such as food stamps, Medicaid, CHIP (children's Medicaid) and housing subsidies.

By contrast, the CBO numbers measure after-tax, after-transfer income. It also includes non-cash transfers. Those benefits may not be fungible, but they do have value. And they vindicate my core point: "The richer have outpaced the poorer in growing their incomes, just as runners will outpace joggers who will, in turn, outpace walkers." What mattered, I said, was that "the walking man walks."

My column also noted that President Obama erred when he said the top 10% take half of aggregate income; in fact, it's the top 20% who take half the income, according to Census Bureau data. Mr. Krugman takes issue with this, too, saying the Census Bureau figures are pretty much worthless when it comes to quantifying the aggregate incomes of the very rich. Much better, he says, is data from a controversial study by two left-wing French economists, Emmanuel Saez and Thomas Piketty, which is in line with President Obama's contention.

Talk about a fast one. As Greg Mankiw, chairman of the Harvard Economics department, notes, Saez-Piketty has its own set of very large problems: "The data are on tax units rather than households, they do not include many government transfer payments, they are pre-tax rather than post-tax, they do not adjust for changes in household size, and they do not include nontaxable compensation such as employer-provided health insurance."

Ultimately, debates about income inequality are never going to be settled because both "income" and "inequality" are very hard to measure. Is the best measure of inequality wage inequality, income inequality, or consumption inequality? If a poor family today can now afford a car, an air conditioner, a computer and other goods unaffordable or unavailable to the poor of 35 years ago, can they really be said to have stagnated economically? How do changes in the tax code affect the ways in which income can be reported, sheltered and measured? What is the true money value of health insurance?

And so on and on. The argument I made in my column is that inequality should only matter to Americans if, Russia-like, the rich are getting richer at the expense of the poor. Neither the Census Bureau nor the CBO figures show that.

None of this is to excuse the fact that I goofed in my use of data. My apologies. As for Mr. Krugman, he should bear in mind something the public editor of the New York Times once said about him: "Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion to please his acolytes but leaves him open to substantive assaults."

"It's altogether fitting that President Obama is today talking about income inequality, because income inequality has increased dramatically as a direct result of his economic policies," he said.

Cruz criticized Obama for proposing more government spending and debt without addressing taxes and regulations that were choking job growth, suggesting that he was running out of new ideas to stimulate the economy.

"All of America needs to be a real 'Promise Zone' — with reduced barriers to small businesses creating private-sector jobs — and we should start by repealing every word of Obamacare, building the Keystone pipeline, abolishing the IRS and rolling back abusive regulations,” Cruz said.

If President Obama wants to reduce income inequality, he should focus less on redistributing income and more on fighting a major cause of modern poverty: the breakdown of the family. A man mostly raised by a single mother and his grandparents who defied the odds to become president of the United States is just the person to take up the cause.

"Marriage inequality" should be at the center of any discussion of why some Americans prosper and others don't. According to Census Bureau information analyzed by the Beverly LaHaye Institute, among families headed by two married parents in 2012, just 7.5% lived in poverty. By contrast, when families are headed by a single mother the poverty level jumps to 33.9%.

And the number of children raised in female-headed families is growing throughout America. A 2012 study by the Heritage Foundation found that 28.6% of children born to a white mother were out of wedlock. For Hispanics, the figure was 52.5% and for African-Americans 72.3%. In 1964, when the war on poverty began, almost everyone was born in a family with two married parents: only 7% were not.

Attitudes toward marriage and having children have changed in America over the past 50 years, and low-income children and their mothers are the ones who are paying the price. The statistics make clear what common sense tells us: Children who grow up in a home with married parents have an easier time becoming educated, wealthy and successful than children reared by one parent. As the Heritage study states: "The U.S. is steadily separating into a two-caste system with marriage and education as the dividing line. In the high-income third of the population, children are raised by married parents with a college education; in the bottom-income third, children are raised by single parents with a high-school diploma or less."

One of the differences between the haves and the have-nots is that the haves tend to marry and give birth, in that order. The have-nots tend to have babies and remain unmarried. Marriage makes a difference. Heritage reports that among white married couples, the poverty rate in 2009 was just 3.2%; for white nonmarried families, the rate was 22%. Among black married couples, the poverty rate was only 7%, but the rate for non-married black families was 35.6%.

Marriage inequality is a substantial reason why income inequality exists. For children, the problem begins the day they are born, and no government can redistribute enough money to fix it. If redistributing money could solve the problem, the $20.7 trillion in 2011 dollars the government has spent on welfare programs since 1964—when President Johnson declared the "war on poverty"—would have eliminated income inequality a long time ago.

The matter is influenced strongly by decisions and values. The majority of women who have children outside of marriage today are adult women in their 20s. (Teenagers under 18 represent less than 8% of out-of-wedlock births.)

Rather than focusing on initiatives that might address this issue, President Obama, as well as Massachusetts Sen. Elizabeth Warren and New York City's new mayor, Bill de Blasio, believe that the income gap can be closed by increasing taxes on the better-off and transferring the money to the poor.

Good luck with that. The tax code is already extremely progressive, as a December study by the Congressional Budget Office makes clear, yet poverty remains a significant problem. According to CBO, the top 40% of wage earners, those who make more than $51,100 a year, paid 86.4% of all federal taxes in 2010, the most recent data available. The bottom 40% of earners paid just 4.2% of all taxes. The top 40% paid virtually all of the income tax collected, while the bottom 40% paid a negative 9.1% of all income taxes. Paying "negative" taxes is possible because of the earned-income tax credit and other public-assistance measures that give the bottom 40% refunds for taxes they didn't pay.

Given how deep the problem of poverty is, taking even more money from one citizen and handing it to another will only diminish one while doing very little to help the other. A better and more compassionate policy to fight income inequality would be helping the poor realize that the most important decision they can make is to stay in school, get married and have children—in that order.

Mr. Fleischer, a former press secretary for President George W. Bush, is president of Ari Fleischer Communications.

Economists Joseph J. Sabia (San Diego State) and Richard V. Burkhauser (Cornell) examined the effects of state minimum wage increases between 2003 and 2007 and reported that they found no evidence the increases lowered state poverty rates.

Further, they calculated the effects of a proposed increase in the federal minimum wage to $9.50 on workers then earning $5.70 (or 15 cents less than the minimum in March 2008) to $9.49. They found that if the federal minimum wage were increased to $9.50 per hour:

. Only 11.3 percent of workers who would gain from the increase live in households officially defined as poor.. A whopping 63.2 percent of workers who would gain were second or even third earners living in households with incomes equal to twice the poverty line or more.. Some 42.3 percent of workers who would gain were second or even third earners who live in households that have incomes equal to three times the poverty line or more.

Why screw up only the most crucial markets like labor, healthcare, food, energy, transportation. Let's have a really high federal minimum price on everything - and see if that makes us richer!-------------------

http://www.nber.org/papers/w18681 Neumark (University of California at Irvine), Wascher (Federal Reserve Board)We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage. -------------------

Regarding the minimum wage, here is some data for Western Europe:

There are nine countries (in Western Europe) with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.

There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland.) Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate.

Still want to raise our minimum wage to $10? The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment. Germany used to have really high unemployment. Then they did labor reforms to allow more low wage jobs, combined with subsidies for low wage workers. Now they don’t have high unemployment.

USDA: Record 20 percent of American households used food stamps in 2013

posted at 2:01 pm on January 22, 2014 by Erika Johnsen

The Obama administration has an unfortunately deliberate penchant for talking out of both sides of its mouth when it comes to touting the slow-going economic “recovery” through which they have been leading the country for the past five years; on the one hand, they insist, the private sector is creating jobs, we’re making steady economic gains, and things are definitely improving. On the other, however, there’s “still more work to be done,” and despite the manifold economic improvements, they assert that the further expansion of entitlement programs like unemployment benefits and food stamps are an absolute necessity to keeping their “recovery” going — and on the latter especially, the Obama administration has been particularly aggressive. CNS News reports that, even in the first year of President Obama’s second term, the federal food-stamp program continued to grow, with a record 20 percent of American households and a record number of individuals participated in the Supplemental Nutrition Assistance Program — and that the program itself reached its record-high budget.

The USDA says that there were 23,052,388 households on food stamps in the average month of fiscal 2013, an increase of 722,675 from fiscal year 2012, when there were 22,329,713 households on food stamps in the average month. …

In 2013, the monthly average for individuals on food stamps hit an all-time-high of 47,636,084, according to the USDA, an increase of 1,027,012 over the 46,609,072 individuals who were participating in the program in 2012. …

For fiscal year 2013, the SNAP program cost $79,641,880,000, which is a 164% increase over the past decade. When adjusted for inflation, the cost of the SNAP program was $30,153,090,000 in fiscal year 2003.

Why, exactly, is it a victory of our economic “recovery” to vastly grow a program designed to temporarily help Americans in need of economic assistance, and why exactly is the program failing to add all the “economic stimulus” the administration promised it would? The version of the farm bill on which lawmakers are currently conferring has sought out a compromise-cut to the almost $80 billion annual program in the form of $9 billion over ten years, but no doubt Democrats will object to even that relatively small budgetary reduction by clobbering Republicans over the head with “draconian”-style demagoguery — rather than asking themselves why it is the continual expansion of the program seems to be so necessary in the midst of the Obama “recovery.”

During a recent lunch in a restaurant, someone complimented my wife on the perfume she was wearing. But I was wholly unaware that she was wearing perfume, even though we had been in a car together for about half an hour, driving to the restaurant.

My sense of smell is very poor. But there is one thing I can smell far better than most people — gas escaping. During my years of living on the Stanford University campus, and walking back and forth to work at my office, I more than once passed a faculty house and smelled gas escaping. When there was nobody home, I would leave a note, warning them.

When walking past the same house again a few days later, I could see where the utility company had been digging in the yard — and, after that, there was no more smell of gas escaping. But apparently the people who lived in these homes had not smelled anything.

These little episodes have much wider implications. Most of us are much better at some things than at others, and what we are good at can vary enormously from one person to another. Despite the preoccupation — if not obsession — of intellectuals with equality, we are all very unequal in what we do well and what we do badly.

It may not be innate, like a sense of smell, but differences in capabilities are inescapable, and they make a big difference in what and how much we can contribute to each other’s economic and other well-being. If we all had the same capabilities and the same limitations, one individual’s limitations would be the same as the limitations of the entire human species.

We are lucky that we are so different, so that the capabilities of many other people can cover our limitations.

One of the problems with so many discussions of income and wealth is that the intelligentsia are so obsessed with the money that people receive that they give little or no attention to what causes money to be paid to them, in the first place.

The money itself is not wealth. Otherwise the government could make us all rich just by printing more of it. From the standpoint of a society as a whole, money is just an artificial device to give us incentives to produce real things — goods and services.

Those goods and services are the real “wealth of nations,” as Adam Smith titled his treatise on economics in the 18th century.

Yet when the intelligentsia discuss such things as the historic fortunes of people like John D.Rockefeller, they usually pay little — if any — attention to what it was that caused so many millions of people to voluntarily turn their individually modest sums of money over to Rockefeller, adding up to his vast fortune.

What Rockefeller did first to earn their money was find ways to bring down the cost of producing and distributing kerosene to a fraction of what it had been before his innovations. This profoundly changed the lives of millions of working people.

Before Rockefeller came along in the 19th century, the ancient saying, “The night cometh when no man can work” still applied. There were not yet electric lights, and burning kerosene for hours every night was not something that ordinary working people could afford. For many millions of people, there was little to do after dark, except go to bed.

Too many discussions of large fortunes attribute them to “greed” — as if wanting a lot of money is enough to cause other people to hand it over to you. It is a childish idea, when you stop and think about it — but who stops and thinks these days?

The transfer of money was a zero-sum process. What increased the wealth of society was Rockefeller’s cheap kerosene that added hundreds of hours of light to people’s lives annually.

Edison, Ford, the Wright brothers, and innumerable others also created unprecedented expansions of the lives of ordinary people. The individual fortunes represented a fraction of the wealth created.

Even those of us who create goods and services in more mundane ways receive income that may be very important to us, but it is what we create for others, with our widely varying capabilities, that is the real wealth of nations.

Intellectuals’ obsession with income statistics — calling envy “social justice” — ignores vast differences in productivity that are far more fundamental to everyone’s well-being. Killing the goose that lays the golden egg has ruined many economies.

Logged

"You have enemies? Good. That means that you have stood up for something, sometime in your life." - Winston Churchill.

"Intellectuals’ obsession with income statistics — calling envy “social justice” — ignores vast differences in productivity that are far more fundamental to everyone’s well-being. Killing the goose that lays the golden egg has ruined many economies."

And last night we just had a President who will force this upon us whether we like it or not.

00.03% of the workforce consist of workers who live in a household below the poverty line and work full time earning minimum wage. Raising the minimum wage will worsen the employment situation, especially for the newest workers in the workforce, but is polls well. So Democrats (always) say, let's make raising it further the centerpiece of the political agenda. http://www.huffingtonpost.com/rep-debbie-wasserman-schultz/federal-minimum-wage-increase_b_4689747.html Meanwhile we have the highest corporate taxes on the planet, the worst business regulatory climate in our nation's history, and a workforce participation rate in free fall.

obs.rc.fas.harvard.edu/chetty/mobility_trends.pdfNBER WORKING PAPER SERIESIS THE UNITED STATES STILL A LAND OF OPPORTUNITY? RECENT TRENDSIN INTERGENERATIONAL MOBILITYRaj Chetty, Bloomberg Professor of Economics at Harvard UniversityNathaniel Hendren, Harvard University economistPatrick Kline, Professor of Economics, UC BerkeleyEmmanuel Saez, Professor of Economics at the University of California, BerkeleyNicholas Turner, Economist, Office of Tax Analysis, U.S. Department of the Treasuryhttp://www.nber.org/papers/w19844NATIONAL BUREAU OF ECONOMIC RESEARCHCambridge, MA January 2014

"We present new evidence on trends in intergenerational mobility in the U.S. using administrative earnings records. We find that percentile rank-based measures of intergenerational mobility have remained extremely stable for the 1971-1993 birth cohorts....[C]hildren entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s."

Is U.S. Unemployment Really Much Better Than the Euro Zone’s?By Ben Leubsdorf

The U.S. labor market looks like it’s recovering faster than its European counterpart, but maybe not as much as it appears, according to a new analysis from the Federal Reserve Bank of New York.

Unemployment in both the euro area and the U.S. peaked around 10% in 2010. Since then, the rate has risen to 12% in Europe but fallen to 6.7% in the U.S., wrote researchers Thomas Klitgaard and Richard Peck on the New York Fed’s Liberty Street Economics blog Wednesday. By that measure, the U.S. looks like it’s doing much better.

But the broader employment-to-population ratio—the share of the working-age, civilian non-institutional population that is employed– showed little change in the U.S. and some decline in Europe over that same period. “This measure of the labor markets does not exhibit any of the gains suggested by the U.S. unemployment rate, with employment only growing in line with the population,” wrote Mr. Klitgaard and Mr. Peck.

The big difference? Labor force participation.

The unemployment rate measures the number of people without jobs as a share of the labor force. But a person has to be actively searching for a job to be counted as unemployed. People who have stopped looking aren’t considered unemployed or part of the labor force, even if they would like a job. As jobless people leave the labor force for whatever reason(such as retirement, going back to school, going on disability or caring for family), fewer people are counted as unemployed.

People have been leaving the workforce in the U.S., but in Europe, the participation rate hasn’t changed much. The rate for European women is actually up about 2%, largely because women over the age of 45 joined the workforce.

“The drop in labor force participation in the United States has accentuated the fall in the U.S. unemployment rate and widened the gap between the unemployment rates of the two economies,” Mr. Klitgaard and Mr. Peck wrote. “If the euro area had seen a drop in the labor force participation rate proportional to the decline experienced by the United States, its unemployment rate would be about 9.5 percent, below where it was at the beginning of the sovereign debt crisis.”

Redistribution, or subsidies and regulations intended to help the poor, unemployed, and financially distressed, have changed in many ways since the onset of the recent financial crisis. The unemployed, for instance, can collect benefits longer and can receive bonuses, health subsidies, and tax deductions, and millions more people have became eligible for food stamps.

Economist Casey B. Mulligan argues that while many of these changes were intended to help people endure economic events and boost the economy, they had the unintended consequence of deepening-if not causing-the recession. By dulling incentives for people to maintain their own living standards, redistribution created employment losses according to age, skill, and family composition. Mulligan explains how elevated tax rates and binding minimum-wage laws reduced labor usage, consumption, and investment, and how they increased labor productivity. He points to entire industries that slashed payrolls while experiencing little or no decline in production or revenue, documenting the disconnect between employment and production that occurred during the recession. The book provides an authoritative, comprehensive economic analysis of the marginal tax rates implicit in public and private sector subsidy programs, and uses quantitative measures of incentives to work and their changes over time since 2007 to illustrate production and employment patterns. It reveals the startling amount of work incentives eroded by the labyrinth of new and existing social safety net program rules, and, using prior results from labor economics and public finance, estimates that the labor market contracted two to three times more than it would have if redistribution policies had remained constant.

In The Redistribution Recession, Casey B. Mulligan offers hard evidence to contradict the notion that work incentives suddenly stop mattering during a recession or when interest rates approach zero, and offers groundbreaking interpretations and precise explanations of the interplay between unemployment and financial markets.

"The category “poorest fifth” may not seem to show much change, but the people in it do. Income mobility is far from dead: 80 per cent of people born in households below the poverty line escape poverty when they reach adulthood."

Most of us think the poor stay poor and inequality is exploding. Wrong. The evidence is that these are times of plenty

The Swedish data impresario Hans Rosling recently asked some British people to estimate the average number of births per woman in Bangladesh and gave them four possible answers. Just 12 per cent got the right answer (2.5), whereas 25 per cent of chimpanzees would have got it right if the answers had been written on four bananas from which they could choose one at random. Remarkably, university-educated Britons did worse, not better, than non-graduates. It is not so much what you don’t know as what you know that isn’t so.

Hold that thought while I introduce you to Tom Perkins, the Silicon Valley venture capitalist and former husband of the crime writer Danielle Steel, who stirred up fury in America when he wrote to The Wall Street Journal last month complaining about a rising tide of hatred against the very rich, and indirectly but crassly comparing it to Kristallnacht. A few days later President Obama used his State of the Union speech to take aim at inequality. In this country, too, inequality is one thing that much rankles with most people, as the 50 per cent tax rate row reveals.

The puzzling thing about this is that by any conceivable measure, absolute poverty has fallen dramatically over the past few decades, so why should it matter if the rich get richer? Today’s British poor spend half as much of their income on food and clothing as in the 1950s, while working many fewer hours, living about eight years longer and having access to phones, cars, medicines and budget airlines that would have amazed even the rich in the 1950s.

Moreover, here’s a question I’m willing to bet that chimpanzees would do better than people at: given that inequality has been rising recently in China, India, America and many other countries, is global inequality rising or falling?

The answer: it’s falling and has been for several decades, however you measure it. The reason is that people in poor countries are getting richer more quickly than people in rich countries are getting better off.

That fall in global inequality has accelerated since the start of the financial crisis. As Africa now experiences record rates of growth, the number of people trying to live on $1.25 a day is plummeting fast. Mr Rosling likes to show two charts in his talks: the graph of global income was once a two-humped camel; now it’s a one-humped dromedary, with the vast majority of the world’s people in the middle.

Here’s another question that I fancy the chimps would beat the people at: did poverty and inequality in Britain increase or decrease as a result of the recession? The answer is that both fell. Inequality has fallen to levels not seen since the mid 1990s, as it usually does during recessions, though it is still higher than it was in the 1970s. Meanwhile the Left’s favourite measure of poverty — those earning less than 60 per cent of the median income — has by definition gone down, because median income has gone down. Redefining poverty in this relative (and very inadequate) way has therefore rather backfired.

If you measure consumption inequality, it is far lower than pre-tax income inequality, because the top 40 per cent of earners pay more in than they get out, while the bottom 60 per cent get more out than they pay in. Indeed, in Britain the top 1 per cent generate about 30 per cent of the total income-tax haul. After such redistribution, the richest fifth of the population has only four times as much money to play with as the poorest fifth.

With big increases in housing benefit and other redistributions, consumption inequality may be as low as it has ever been. Add in the value of pensions (including the state pension), free healthcare, the fall in the price of food and clothing relative to wages, plus the dramatic fall in the cost of much technology and it is clear that for most basic needs, the country has never been less poor or less unequal. A smartphone’s search engine may be about as capable as a plutocrat’s full-time secretary was in 1960.

Imagine being told that one of the people in a meeting is a genuine billionaire (I owe this idea to Professor Don Boudreaux). How would you tell which one? His bodyguards, private jets and grouse moors are outside the room; his shirt and jeans are unlikely to give him away (as they would in 1900); his Rolex could be a cheap imitation; his teeth, girth and height are probably unremarkable (unlike in 1800); even his Diet Coke is the same as everybody else’s. Much more than in the past, most inequality in this country these days — though by no means all — is in luxuries, rather than necessities.

Here’s another question where my money is on the chimps: does income generally grow faster for people in the lowest fifth of the population or people in the highest? It’s the lowest, because many of those people are young, low-paid people just starting out on their careers, while many of the richest fifth are older people at the peak of their pay, about to retire. That is to say, the category “poorest fifth” may not seem to show much change, but the people in it do. Income mobility is far from dead: 80 per cent of people born in households below the poverty line escape poverty when they reach adulthood.

[D]oes income generally grow faster for people in the lowest fifth of the population or people in the highest? It's the lowest, because many of those people are young, low-paid people just starting out on their careers, while many of the richest fifth are older people at the peak of their pay, about to retire. That is to say, the category "poorest fifth" may not seem to show much change, but the people in it do. Income mobility is far from dead: 80 per cent of people born in households below the poverty line escape poverty when they reach adulthood.

None of this is meant to imply that people are wrong to resent inequality in income or wealth, or be bothered about the winner-take-all features of executive pay in recent decades. Indeed, my point is rather the reverse: to try to understand why it is that people mind so much today, when in many ways inequality is so much less acute, and absolute poverty so much less prevalent, than it was in, say, 1900 or 1950. Now that starvation and squalor are mostly avoidable, so what if somebody else has a yacht?

The short answer is that surely we always have and always will care more about relative than absolute differences. This is no surprise to evolutionary biologists. The reproductive rewards went not to the peacock with a good enough tail, but to the one with the best tail. A few thousand years ago, the bloke with one more cow than the other bloke got the girl, and it would have cut little ice to try to reassure the loser by pointing out that he had more cows than his grandfather, that they were better cows, or that he had more than enough cows to feed himself anyway. What mattered was that he had fewer cows.

Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers....The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold.

March 10, 2014At This Rate, It Will Take 28 Years To Get Everyone Back To WorkBy Louis Woodhill (Forbes contributor)

From a jobs perspective, the economy treaded water in February. We didn't drown in unemployment, but nor did we manage to swim closer to the prosperity shore. It was a "blah" month, in the midst of the worst economic recovery in American history.

Full-time-equivalent* (FTE) jobs increased by 147,000, thanks mostly to a large decline in the number of part-time workers. This was enough to move the nation 45,000 FTE jobs closer to full employment. While this was better than average for a month in President Obama's so-called "economic recovery" (America is 2.2 million FTE jobs farther away from full employment now than it was in June 2009), it's not great. At this rate, it would take us almost 28 years to get everyone back to work.

It was extremely significant that labor force participation continued to move up during February, after its big surge in January. This confirmed that allowing extended unemployment benefits to expire in late December was the right thing to do.

Progressives predicted that limiting unemployment benefits would cause people to drop out of the labor force, but the exact opposite occurred. It turns out that people respond to incentives. Who knew?

February's employment numbers also lent support to the theory that the Federal Reserve's quantitative easing produces the opposite effect of what the Fed intends and expects. The Fed increased the size of the monetary base by eight times as much in February as it did in January ($102.3 billion vs. $12.7 billion), and the rise in FTE jobs slowed from 678,000 to 147,000.

The financial markets appear to have figured out that quantitative easing has been a bad thing for the economy. The stock market has continued to make new highs in spite of (really, because of) the Fed's determination to "taper."

OK, so as of February 2014, America had 2.0 million fewer FTE jobs than it did in November 2007. Meanwhile, our working age population has grown by 13.9 million. During these 75 months, Labor force participation has plunged by three full percentage points. This amounts to 7.4 million Americans giving up on being self-supporting. What are our two great political parties offering to get our economy moving again?

President Obama delivered his plan, in the form of his FY2015 budget. Here is a quote from Obama's "Budget Message" that summarizes his approach:

"But there is clearly much more we can and should do to invest in areas like infrastructure, innovation, and education that will create jobs, economic growth, and opportunity."

When Obama (or any other progressive) uses the word "we," he is not referring to "We, the People," he is referring to "We the federal government." The essence of the progressive approach is to transfer more and more money to unelected, unaccountable "experts" in the federal bureaucracy. The presumption is that these experts will deploy this capital to produce economic returns superior to those that the private markets could manage if people were allowed to keep and invest their own money.

In short, the Obama approach is, "More Amtracks! More Solyndras!"

As George Gilder explained in his brilliant and important 2013 book, Knowledge and Power, the progressive approach cannot work. Progressive programs take power (money is a form of power) away from the people with the knowledge required to make effective use of it. Governments invariably deploy resources to serve political ends, not the interests of ordinary citizens.

The progressive road leads to Venezuela (which may be why progressives are so sympathetic to socialist dictators).

Congressman Dave Camp, the Chairman of the House Ways and Means committee, unveiled his tax reform plan. The idea that our Byzantine tax code could be "simplified" by a plan that runs 979 pages is questionable. However, the Camp plan's fatal flaw is that it is not strongly "pro-growth" (and may not, on balance, be pro-growth at all).

If we look at the Camp plan through the lens of Knowledge and Power, we see that it would do little to help foster the next generation of Apples and Googles. Entrepreneurs need a simple, stable tax code, and one that allows them to reinvest all of their profits in growth. This would provide the fastest route to full employment, because most incremental high-paying jobs come from new companies that are growing fast.

The Camp tax plan looks like the result of a three-year battle among big-company lobbyists, which is basically what it is. It is apparently "dead on arrival," and it should be.

When and if Republicans are ready to stop being "the Stupid Party," they will get behind the FairTax (which is a national sales tax). Because it does not tax savings and investment at all, the FairTax would produce the best alignment of knowledge (which resides in the minds of entrepreneurs scattered throughout the country) and power (capital).

The FairTax (coupled with a stable dollar) would deliver eye-popping rates of real economic growth. This combination would get America to full employment much faster than most people would believe possible.

For their part, FairTax advocates must realize that pro-growth tax reform cannot and should not be "revenue neutral," as scored by the CBO. Their proposed 23% FairTax rate is much too high. On a present value basis, a 15% tax rate would provide the federal government with more than enough revenue for any constitutional purpose.

There were some positive vibes from conservatives this week. In his speech to CPAC, Senator Ted Cruz laid out a ten-point plan for national revival. Most of it was on target, both economically and politically.

Crucially, Cruz devoted one of his ten points to the dollar. He said:

"We need to audit the Federal Reserve. Unaccountable power in Washington, debasing our currency, driving up the cost of food and gas and the basic stuff of life, is hurting Americans who are struggling across this country. I'll tell you what else it's doing, it's fueling the abuse of power of Petro-Tyrants like Putin."

Unfortunately, auditing the Fed is not enough. Under Janet Yellen, the Fed is operating with no rules at all. From a Knowledge and Power perspective, this produces so much "noise" in the communication channel (our system of market prices) that vital economic signals are being distorted and corrupted. This leads to, well, exactly what we have seen for the past 13 years-the slowest real economic growth in American history.

If we are going to have fast economic growth and full employment, we need what Gilder calls "a low entropy channel." This will require that Fed monetary operations be based upon rules. Accordingly, Republican candidates must not only criticize the Federal Reserve, and support "auditing the Fed", but also back Congressman Kevin Brady's "Centennial Monetary Commission Act." America needs fundamental monetary reform, and the Fed is not likely to reform itself.

The one place that Senator Cruz went off the rails of sound economic policy was in his call for "...a strong balanced budget amendment." As George Gilder points out in Knowledge and Power, whether you are a company or a nation, assets matter much more than liabilities.

Ronald Reagan did not pull America out of stagnation and despair in the 1980s by balancing the budget. He did it by getting the economy growing rapidly. This produced a massive increase in the value of the federal government's principle asset-its share of the present value of future GDP. This, in turn, made Reagan's deficits irrelevant. Interest rates fell during Reagan's presidency, despite "record" budget shortfalls.

While calls for a balanced budget amendment might play well in Republican primaries, they will be political poison in general elections. In the general election, candidates calling for a balanced federal budget will be cornered into explaining how they propose to perform surgery (spending cuts) without anesthesia (strong economic growth, which will require cutting taxes).

Surgery without anesthesia has never been popular with patients. Nor would be large cuts in the federal safety net, until fast economic growth is providing most people with the opportunity to earn wage income to replace the withdrawn federal support.

The economy has now been so bad for so long that our elites have accepted quasi-depression as the "new normal." The Democrats are now offering ideas that amount to "economic hospice care."

For example, Democrat Senator Elizabeth Warren has introduced a bill that would bar employers from conducting credit checks on job applicants. All this use of government coercion could possibly accomplish is to reallocate jobs from people with good credit to people with bad credit. And, of course, there is President Obama's strident call for a $10.10/hour minimum wage, which would give some workers a raise, but would cost others their jobs.

Meanwhile, in general, are Republicans continuing to validate their label, "the Stupid Party," by focusing on deficits, rather than upon economic growth.

America is tired of treading water on the jobs front. It needs Republican candidates that will step forward with big, pro-growth ideas. Memo to Republican candidates: read Knowledge and Power. Then come out for a stable dollar, the FairTax, and a return to regulatory sanity.

The point about the number of hours worked being the north star seems sound to me:

============================================

ByEdward P. LazearMarch 16, 2014 6:29 p.m. ET

Most commentators viewed the February jobs report released on March 7 as good news, indicating that the labor market is on a favorable growth path. A more careful reading shows that employment actually fell—as it has in four out of the past six months and in more than one-third of the months during the past two years.

Although it is often overlooked, a key statistic for understanding the labor market is the length of the average workweek. Small changes in the average workweek imply large changes in total hours worked. The average workweek in the U.S. has fallen to 34.2 hours in February from 34.5 hours in September 2013, according to the Bureau of Labor Statistics. That decline, coupled with mediocre job creation, implies that the total hours of employment have decreased over the period.

Job creation rose from an initial 113,000 in January (later revised to 129,000) to 175,000 in February. The January number frightened many, while the February number was cheered—even though it was below the prior 12-month average of 189,000.

The labor market's strength and economic activity are better measured by the number of total hours worked than by the number of people employed. An employer who replaces 100 40-hour-per-week workers with 120 20-hour-per-week workers is contracting, not expanding operations. The same is true at the national level.

The total hours worked per week is obtained by multiplying the reported average workweek hours by the number of workers employed. The decline in the average workweek for all employees on private nonfarm payrolls by 3/10ths of an hour—offset partially by the increase in the number of people working—means that real labor usage on net, taking into account hours worked, fell by the equivalent of 100,000 jobs since September.

Here's a fuller explanation. The job-equivalence number is computed simply by taking the total decline in hours and dividing by the average workweek. For example, if the average worker was employed for 34.4 hours and total hours worked declined by 344 hours, the 344 hours would be the equivalent of losing 10 workers' worth of labor. Thus, although the U.S. economy added about 900,000 jobs since September, the shortened workweek is equivalent to losing about one million jobs during this same period. The difference between the loss of the equivalent of one million jobs and the gain of 900,000 new jobs yields a net effect of the equivalent of 100,000 lost jobs.

The decline of 1/10th of an hour in the average workweek—say, to 34.2 from 34.3, as occurred between January and February—is like losing about 340,000 private nonfarm jobs, which is approximately 80% greater than the average monthly job gain during the past year. The reverse is also true. In months when the average workweek rises, the jobs numbers understate the amount of labor growth. That did occur earlier in the recovery, with a general upward trend in the average workweek between October 2009 and February 2012.

What accounts for the declining average workweek? In some instances—but not this one—a minor drop could be the result of a statistical fluke caused by rounding. Because the Bureau of Labor Statistics only reports hours to the nearest 1/10th, a small movement, say, to 34.449 hours from 34.450 hours, would be reported as a reduction in hours worked to 34.4 from 34.5, vastly overstating the loss in worked time. But the six-month decline in the workweek, to 34.2 from 34.5 hours, cannot be the consequence of a rounding error.

Was it the harsh winter in much of the United States? One problem with that explanation is that the numbers are already seasonally adjusted.

Imperfections in the adjustment method can result in weather effects, but the magnitude is far from clear, especially given that parts of the West, Midwest and South experienced milder-than-normal weather, with fewer business-reducing storms. Also, the shortening of the workweek began before the winter set in, with declines in hours from September to October.

Another possibility for the declining average workweek is the Affordable Care Act. That law induces businesses with fewer than 50 full-time employees—full-time defined as 30 hours per week—to keep the number of hours low to avoid having to provide health insurance. The jury is still out on this explanation, but research by Luis Garicano, Claire LeLarge and John Van Reenen (National Bureau of Economic Research, February 2013) has shown that laws that can be evaded by keeping firms small or hours low can have significant effects on employment.

The improvement in average weekly hours worked was reason for celebration after the recovery began. The recent decline is cause for concern. It gives us a more accurate but dismal picture of the past two quarters.

Mr. Lazear, who was chairman of the president's Council of Economic Advisers from 2006-09, is a professor at Stanford University's Graduate School of Business and a fellow at the Hoover Institution.

One of the primary narratives associated with comprehensive immigration reform has nothing to do with the millions of low-skill workers that would be granted an opportunity to compete against Americans for jobs. As a letter sent to the president and Congressional leaders signed by more than 100 chief executives of major tech companies and trade associations indicates, there is a shortage of highly-skilled American labor that drives reform as well. Yet as The Atlantic’s Michael S. Teitelbaum reveals, that narrative is a lie.

“A compelling body of research is now available, from many leading academic researchers and from respected research organizations such as the National Bureau of Economic Research, the RAND Corporation, and the Urban Institute,” Teitelbaum explains. ”No one has been able to find any evidence indicating current widespread labor market shortages or hiring difficulties in science and engineering occupations that require bachelors degrees or higher…All have concluded that U.S. higher education produces far more science and engineering graduates annually than there are S&E job openings—the only disagreement is whether it is 100 percent or 200 percent more.”

He then introduces the 800-pound gorilla of Economics 101, as in the reality that a genuine shortage of high-skill workers would pressure those seeking an ostensible scarcity of talent to offer higher levels of compensation to potential workers. Unfortunately, exactly the opposite is occurring. “Most studies report that real wages in many—but not all—science and engineering occupations have been flat or slow-growing, and unemployment as high or higher than in many comparably-skilled occupations.”

How does this reconcile with the claims of people like Facebook CEO Mark Zuckerberg and Yahoo CEO Marissa Mayer? “Because labor markets in science and engineering differ greatly across fields, industries, and time periods, it is easy to cherry-pick specific specialties that really are in short supply, at least in specific years and locations,” Teitelbaum explains. And while he concedes that high-skill occupations have unemployment rates lower than those of the workforce in general, “surprisingly high unemployment rates prevail for recent graduates even in fields with alleged serious ‘shortages’ such as engineering (7.0 percent), computer science (7.8 percent) and information systems (11.7 percent).”

The Economic Policy Institute (ECI) also hammers home reality about the so-called shortage of foreign workers, revealing that in 2011, the number of college-educated “guest workers” under the age of 30, comprised 66 percent of the 166,000 new college-educated Information Technology (IT) job holders under the age of 30. They further note that this reality is discouraging many Americans students in the science, technology, engineering and math (STEM) fields from entering IT.

With good reason. Americans colleges already graduate 50 percent more computer science majors than are finding jobs in IT. The ECI further notes that if comprehensive immigration reform and/or the Skill Visa Act promoted by Republicans Darryl Issa (R-CA) and Bob Goodlatte (R-VA) become reality, the conservative estimate of 180,000, “new IT guestworkers and STEM green card beneficiaries will be greater than the number of new hires of young IT college graduates in 2011.”

At the heart of this sellout is is the H-1B visa program. The Government Accountability Office (GAO) does its best to obscure reality, stating that most of those visas are used to fill “entry level” positions. Yet EPI confirms Teitelman’s assessment of flat or slow-growing wages, revealing that such workers are not only competing with recent U.S. graduates, but providing a supply of lower-wage guest workers that can take jobs from older workers as well.

Computerworld, which on April 1 received the latest data regarding H-1B visas from the U.S. Citizenship and Immigration Services (USCIS), explains there is such heavy demand anticipated, all of them will be claimed by the end of this week. They further note that the majority claimants will be firms “that use visa holders to displace U.S. workers.” ”The offshore outsourcing firms are once again getting the majority of the visas,” said Ron Hira, a public policy professor at the Rochester Institute of Technology in New York. “The program continues to promote the offshoring of high-wage American jobs.”

The top three companies on the list of visa approval in 2013 were Infosys, Tata Consultancy Services (TCS) and Cognizant. Other players include IBM, Microsoft, Amazon, Intel, Google and Oracle. Many of these firms hire IT workers for offshore outsourcing contracts. Domestic workers who are replaced as a result often have to train their replacements as a condition of their severance package. Companies such as Cognizant insist they maintain a robust effort to hire American workers, but they do not disclose data to support that contention. Moreover, in 2013, Infosys agreed to pay $34 million to resolve a claim by the federal government: they had accused the firm of running an unlawful visa scheme. Infosys also refused to release data on its U.S. workforce.

Food and agricultural producer Cargill is another company outsourcing its IT jobs, sending them to TCS. Cargill’s home base is in Minnesota, and Sen. Amy Klobuchar (D-MN), along with Marco Rubio (R-FL), Chris Coons (D-DE), and Orrin Hatch (R-UT) were developing the Immigration Innovation Act of 2013. The bill aims to initially raise the current H-1B cap of 85,000 visas, comprised of 65,000 H-1Bs, plus an additional 20,000 set aside for advanced degree gradates of American universities, to 115,000. It also includes an increase in the cap based on demand, until it reached 300,000 visas every year thereafter., even as it exempts advance degree STEM students from the total. In addition, the bill won’t apply employment-based green card quotas to foreign students earning a master’s or doctorate in STEM fields at a U.S. university, or their spouses and minor children.

The bill passed in the Republican-controlled House on Dec. 5, 2013. It has yet to be taken up by the Democratically-controlled Senate.

Even as this amounts to dream legislation for high-tech companies, they are keeping up the pressure on lawmakers. In March, Goodlatte, who is the House Judiciary Committee Chairman, held a high-dollar fundraiser in Silicon Valley with pro-amnesty forces who ponied between $10,000 and $40,000 apiece for the privilege. Ron Conway, a prolific angel investor and venture capitalist, expressed the kind of arrogance one expects from those who seemingly believe government should be particularly responsive to high rollers. “In this case, because there’s been mixed messages from the Republicans, before I write my check, I wanted some assurances that Bob Goodlatte would be prepared to discuss immigration reform and what the timetable is for immigration reform, because we’re coming down the wire here with the [2014] elections and we need accountability,” he declared.

If genuine accountability is wanted–as opposed to the fulfillment of an agenda–getting the facts right would be a good place to start.

Both Teitelbaum and Michael Anft, senior writer for John Hopkins magazine, reveal that stores about a shortage of STEM workers are nothing new. Teitelbaum refers to five “alarm/boom/bust” cycles, each lasting about 10 to 15 years. From just after WWII through 2003, each cycle was initiated by alarms about a worker shortage, followed by policies to increase the supply of STEM workers, followed by the inevitable busts characterized by “mass layoffs, hiring freezes, and funding cuts that inflicted severe damage to careers of both mature professionals and the booming numbers of emerging graduates, while also discouraging new entrants to these fields.”

Anft speaks to the same phenomenon, noting that prior to Americans worrying about the current emergence of China and India as the primary challengers to our status as the world’s preeminent innovator, “there were ruckuses caused by an increase in foreign auto and electronics imports (Japan) in the 1970s and 80s, a fear that someone else (the U.S.S.R.) would win the space race in the 50s and 60s, and the wartime emergency (Nazi Germany) that led to the Manhattan Project in the 40s.”

Hira, who has testified before Congress regarding the issue, notes the hypocrisy of high-tech firms like Microsoft who advocate for more IT visas, even as they lay off thousands of Americans with comparable skills. Norman S. Matloff, a professor of computer science at the University of

California at Davis, is far more direct. “This is all about industry wanting to lower wages,” he contends.

Toward that end, high-tech companies are making contingency plans, in case their current push for comprehensive immigration reform proves unsuccessful. As Silicon Valley attorney John Bautista reveals, some companies with solely domestic operations are exploring the idea of opening offices overseas so they can hire people and bring them back to America on visas that allow for internal transfers of existing employees. ”Before [corporate boards said], ‘We’ve got someone we want to hire, what’s the best way to bring him over?’” he explained. “Now it’s, ‘We have a hiring problem, let’s use the immigration laws to come up with an overall strategy to bring teams of people on board.’”

Part of that overall strategy includes the oldest strategies of all: pumping loads of cash into political campaigns and lobbying efforts. According to the Center for Responsive Politics, the computer and Internet industries showered Democrat and Republican candidates for federal office, as well as political committees, with $62 million during the 2012 election cycle. That same year tech companies spent a record-setting $132.5 million on Washington lobbying efforts, running their ten-year total in that regard to over $1 billion.

In 2013, the tech sector combined forces with the agricultural sector. They were joined by the Chamber of Commerce, which added another $52.7 million to reform lobbyists’ coffers. ”We’re determined to make 2014 the year that immigration reform is finally enacted,” said Chamber President and CEO Tom Donohue in January.

By any means necessary it seems. Whether they get across the finish line remains to be seen. Likely 2016 GOP presidential candidate Rand Paul (R-KY) is the latest Republican to drink the comprehensive Kool-aid, insisting that his party has to get ”beyond deportation to the rest of the issues,” if they want to compete for Hispanic votes. Those would be the same Hispanic votes that have never accrued to Republicans in more than three decades of elections. Furthermore, alienating both low-skill and high-skill American workers as a tradeoff is a fool’s errand.

Unfortunately, for un- or under-employed Americans, the outright lie that there’s a shortage of high-tech workers apparently take precedence over their well-being. For Democrats, virtually anything the expands the dependency of Americans has become, rather than a badge of shame, an integral part of their party platform. For Republicans, it the sop of accommodating their business allies, and siren song of possibly newfound Hispanic fealty that drives their ambitions. In a better world, the efforts by both parties would be seen as the contempt for the rule of law and the utter lack of concern for Americans they truly represent. In this one, the narrative, no matter how duplicitous and despicable, rules the roost.

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"You have enemies? Good. That means that you have stood up for something, sometime in your life." - Winston Churchill.

Last Sunday, The New York Times published a front-page article about the heartfelt need of California farmers for more illegal aliens.

The first tip-off that heinous public policy ideas were coming was that the Times introduced farmer Chuck Herrin, owner of a farm-labor contracting company, as a “lifelong Republican.” That’s Times-speak for “liberal.”

Herrin admitted that he employs a lot of illegal aliens and bitterly complained that they lived in fear of “Border Patrol and deportations.” (But, apparently, he doesn’t live in fear of admitting he’s violating our immigration laws.)

Sorry that running a country inconveniences you, Chuck.

He said his illegal alien employees deserved amnesty because if “we keep them here and not do anything for them once they get old, that’s really extortion.”

As the punch line goes, “What’s this ‘we,’ paleface?”

Taxpayers have been subsidizing Chuck Herrin’s underpayment of his illegal labor force for decades, with skyrocketing taxes to pay for schools, roads, bridges, food stamps, health care and so on. Now Herrin thinks “we” are supposed to support his illegal employees in their old age, too.

Here’s another idea: How about a federal law mandating that employers of illegal aliens take responsibility for the people they hire? Why is the taxpayer on the hook for illegal aliens’ food, housing and medical care, when Chuck Herrin got 100 percent of the profit from their cheap labor?

We don’t allow chemical companies to dump pollutants in rivers, walk away and then say, “If we dump chemicals in rivers and we don’t clean them once the plant is gone, that’s really criminal.”

No, you dumped the chemicals — not “we.” And you, Chuck Herrin, got the cheap labor — not “we.”

This is even worse than the Wall Street bailouts — another example of fat cats pocketing 100 percent of the profits when business is good, but demanding a taxpayer handout when their investments go south. At least the Wall Street bailouts didn’t alter the country forever by giving the Democrats 30 million new voters.

According to the California Hospital Association, health care for illegal aliens is costing state taxpayers well over $1 billion a year.. Eighty-four hospitals across California have already been forced to close because of unpaid bills by illegal aliens.

Last year alone, California taxpayers paid $32 million for indigents’ health care at hospitals located in Fresno County– which happens to be where Chuck Herrin’s company is based. How about submitting a portion of that cost to Herrin?

Here’s your bill for $13 million.

What’s this for?

The county hospital. You’ve been paying your employees $20 an hour, and that’s just not enough to pay for their measles and tuberculosis treatments, not to mention delivery of their premature babies. No one’s saying it’s your fault, but it’s not the county hospital’s fault either.

Luckily, you’ve got deep pockets, Chuck – several hundred million dollars a year, we understand – thanks in part to how little you pay your workers, who are burdening our local services.

Not only should employers of illegal aliens be responsible for their employees’ becoming public charges, but they ought to be legally responsible for any crimes their illegal workers commit, just as parents can be for the crimes of their minor children, and bars can be for the behavior of their over-served customers.

Why should employers of illegal aliens be allowed to externalize their costs, while keeping 100 percent of the profits?

The very fact that the American taxpayer is required to subsidize illegal alien farm labor — to say nothing of anti-competitive marketing orders, tariffs and subsidies given to farmers — proves that we’re propping up an industry the country doesn’t need.

If Mexican farm labor is so much cheaper, maybe we should be growing our fruits and vegetables in Mexico. There’s absolutely no reason to import Mexicans to do something they could do at home and then sell to us. I believe this is what economists call “competitive advantage.”

The Times quotes a report by two pro-amnesty farmers groups, Partnership for a New American Economy and the Agriculture Coalition for Immigration Reform, complaining that American consumption of foreign-grown produce has increased by 80 percent since the late 1990s.

I see why rich farmers are alarmed by that, but why should Americans care? If food can be grown cheaper in other countries, isn’t it the very essence of libertarian free trade principles to buy it from them?

No. Apparently, we’re required to wreck the country by bringing in millions upon millions more poor people so we can save the buggy whip industry.

We didn’t do that with oil. We didn’t do it with steel. We must be “Fortress America” only when it comes to asparagus!

I care more about my fellow Americans who can’t get well-paying jobs than I do about multimillionaire farmers, demanding that the rest of us pay to support an industry that claims it can’t compete without taxpayer-subsidized illegal alien labor.

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"You have enemies? Good. That means that you have stood up for something, sometime in your life." - Winston Churchill.